MEXICO CITY, July 3 (Reuters) - Wall Street on Monday cheered the apparent defeat of a Mexican leftist presidential candidate whose spending promises raised debt fears, but a looming vote dispute and a longer-term political crisis may ruin the party.

Conservative candidate Felipe Calderon declared victory on Monday after Sunday's hotly contested election, and official returns appeared to show that leftist favorite Andres Manuel Lopez Obrador could not catch him.

"The market thought that Lopez Obrador was going to win," said Benito Berber, an economist at HSBC Securities. "Suddenly we're in a position where it seems that Calderon is going to be the next president."

Lopez Obrador had wooed many of Mexico's poor with handouts to the elderly, disabled and single mothers while mayor of Mexico City, and promised a greater state role in the economy.

Ruling party candidate Calderon, however, wants to continue the free-market policies of President Vicente Fox.

Investors had grudgingly priced in a Lopez Obrador win based on polls ahead of Sunday's vote, and Mexico's currency, bond prices and stocks all rallied on Monday as authorities showed Calderon ahead with most almost all votes counted.

The stock market soared 4.77 percent on Monday, its second-biggest one-day gain this year, and the peso strengthened 1.8 percent.

But with Lopez Obrador expected to contest a final result that will not come until at least Wednesday and little clue as to how millions of his poor supporters will react to having their hopes dashed, market euphoria could be short-lived.

"The fact that Calderon is now the most likely winner is a positive for the market," said Alberto Bernal, an economist at Bear Stearns. "The bad news is that the election will be contested, I have absolutely no doubt about it."

"(Wall Street's celebrations) definitely could be short-lived, bad news could come at any point," he said. "The risk remains of strikes, disruption to economic activity and violence."

TOO CLOSE TO CALL

Electoral authorities said late on Sunday that the contest was too close for the result to be based on a quick count. But both candidates claimed victory on television, a move seen exacerbating tensions that could lead to market volatility.

"We see these hasty declarations as a potential risk that the election could be disputed in the electoral court or, in the worst case scenario, on the streets." Goldman Sachs said in a research report.

Lopez Obrador can challenge the final result in Mexico's electoral court, a process that could leave markets in limbo for several weeks, although most analysts say his party would need to present concrete evidence of vote fraud to do so.

The election was Mexico's first since Fox broke the Institutional Revolutionary Party's 71-year hold on power in 2000, but some say the country's democracy is mature enough to sidestep chaos.

"This is not a new democracy that came out of dictatorship yesterday," he said. "We're dealing here with a political leadership which although very divided, is very mature at the end of the day. They do negotiate things."

While Fox has been praised for maintaining economic stability, a deadlock in Congress has stopped him passing structural reforms economists say are vital.

While the National Action Party appeared to have increased its share of Congress on Sunday, so did Lopez Obrador's party and Calderon looks likely to inherit the same stalemate.

"The nature of this victory being so close means that there's greater uncertainty over the medium term about the ability to come to agreements on these issues that are really important for Mexico," said Mukherji. "I think that will be a sobering thought to the market."

It's very instructive to observe that, once again, the online sites such as tradesports.com got it right in advance of even the forex mkts.

By 10:00 central time last night, Calderon was 70 bid on tradesports (implying his later win, which would in turn imply MXN rising vs USD), but the Globex CME Peso contract was still at that time down almost 9 ticks (0.0875 if you're a trader).

I don't know why Brosnan was crying. It doesn't matter if the "left" or the "right" wins in Mexico. El Presidente Felipe Calderon will become a billionaire in the next six years, compliments of their legacy of unmitigated corruption and greed.

Calderon, el gran ladron. Hey, I made a little rhyme.

9
posted on 07/03/2006 3:38:46 PM PDT
by starfish923
( Socrates: It's never right to do wrong.)

I don't know why Brosnan was crying. It doesn't matter if the "left" or the "right" wins in Mexico. El Presidente Felipe Calderon will become a billionaire in the next six years, compliments of their legacy of unmitigated corruption and greed.

LOL! Some others are crying, IMO, and that would be the tancredo/buchanan political family.

A PAN elected Mexico(PAN made great gains in the Mexican Senate election) is the tancredo/buchanan worst nightmare.

A stable and freemarket oriented Mexico, IMO, means one less bogeyman for the tancredo/buchanan family to count on for money.

It ain't time to pop the corks on any bottles. The FAT LADY has not yet begun to sing. Wait, cautiously and see if the other candidate accepts the results, otherwise, it may spill on to the streets, kind of like Hugo Chavez led massive protests and got his power....

Well he's also wrong about "Wall Street". I think he's confused the Mexican stock market with the American. According to the article he said the market closed up 4.77%, the second highest one day advance this year. The Dow closed up 0.7 percent today.

The headline of an earlier Reuters story today was even better. "Conservative creeps to victory in Mexico". Somehow if the leftist had been gaining, he would have been surging, not creeping. They also had another headline up that they just changed as I was watching. It said "Mexican standoff leaves markets on edge" and was changed to "Mexican vote standoff leaves markets on edge".....guess someone pointed out the bit of politically incorrectness in the first version.

I am glad someone else remembers that. It semmed to me that whenever Gore came out and made an irritating comment, the market dropped. Then Bush would send Cheney out to make a staement and the market would rise.

After about a week of this, it got to be pretty funny, and especially so because the press didn't mention it.

A stable and freemarket oriented Mexico, IMO, means one less bogeyman for the tancredo/buchanan family to count on for money.

Mexico HAS been relatively stable and freemarket for a long time. The problem has been that Mexico is ALWAYS compared to the U.S. and that is unfair.

Mexico is 10,000 times better today than it was 100 years ago, for everyone. But it will never catch up to the gringos and it is grossly unfair to continue to compare them with us.

Mexico IS considered the "giant" of the north, as their southern neighbors experience coup d'etats with regularity. Mexico's peso is considered far more stable than the garbage money of their southern neighbors.

So, when I bad-mouth Mexico it is with the FULL knowledge of all this. They are INFINITELY better off, more stable and more reliable than almost all of their southern neighbors. They ARE our amigos as much as they can be.

However, PAN and PRI are made, imho, from the same cloth: the corrupt cloth that is the Mexican culture. I don't think Mexico CAN produce much else from the same pool of people. They improve over the decades but their Presidente, no matter who he is, will, for now at least, be the BIGGEST ladron in all of Mexico, PRIista or PANista. [I made up those words just now.:o)]

I did live in Mexico City for 2 years and traveled extensively throughout the Republic....and spend the two years getting to know my extensive family of 40+ relatives. They, and friends I made there, are the ones who helped me form my opinion of Mexican politics. They might be dead wrong, but I kind of doubt it.

28
posted on 07/04/2006 9:08:57 AM PDT
by starfish923
( Socrates: It's never right to do wrong.)

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